How Analysts View Micron After Earnings

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Micron Technology Inc. (NASDAQ: MU) released its fiscal fourth-quarter earnings report after the markets closed on Tuesday. This company has been all over the charts in 2016, with its shares practically doubling in just the past six months. While this earnings report more or less solidified Micron’s position at its current price level, some analysts are still seeing a little more room to run, though one standout that believes this company is way overvalued.

24/7 Wall St has included some highlights from the earnings report, as well as what analysts are saying after the fact.

Micron posted a net loss of $0.05 per share on $3.22 billion in revenue. The consensus estimates from Thomson Reuters had called for a net loss of $0.12 per share on revenue of $3.15 billion. In the same period of last year, Micron reported EPS of $0.37 and $3.6 billion in revenue.

DRAM sales volumes were up roughly 20%, while NAND sales volumes were up approximately 12%. DRAM average selling prices declined approximately 6%, while NAND average selling prices were relatively unchanged. The company’s overall consolidated gross margin of 18% for the fourth quarter of fiscal 2016 was slightly higher compared to the third quarter due to increases in gross margin of DRAM products.

Merrill Lynch reiterated an Underperform rating with $9 price objective. The brokerage firm gave its investment thesis as follows:

The bull-case scenario (potential success of 20nm DRAM and 3D NAND ramp-up and then OP generation at single digits; GM mid to high 20%) still indicates EPS far below $1 (vs $2.5 in 2014-15). High debt (gross $10 billion, net $4 billion) and potential dilution from a possible Inotera deal (completion delayed by uncertain agenda though) could limit shareholder value growth. Hynix looks better due to higher margins and minimal debt. Overall, we are positive on the memory chip industry, but remain Underperform on Micron given its low margin (high earnings multiples).

A few other analysts weighed in on Micron, with a far more positive sentiment:

  • Baird has an Outperform rating and raised its price target to $22 from $18.
  • Brean has a Buy rating and raised its price target to $23 from $18.
  • Goldman Sachs cut its price target to $16 from $18.
  • Mizuho has a Buy rating and raised its price target to $22 from $20.
  • Stifel has a Buy rating and raised its price target from $20 to $22.
  • Susquehanna has a Positive rating and raised its price target to $21 from $20.
  • Cowen reiterated a Positive rating.
  • Morgan Stanley reiterated an Overweight rating with a $20 price target.
  • Credit Suisse reiterated an Outperform rating with a $20 price target.

Shares of Micron were trading up about 2.3% at $18.21 on Wednesday, with a consensus analyst price target of $18.90 and a 52-week trading range of $9.31 to $19.30.